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RBA braces for record number of damaged bank note claims post Australian bushfires

By business reporter Nassim Khadem, Tuesday January 14, 2020 - 19:30 EDT
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The RBA said it has not had bushfire-related claims yet, but is expecting a "reasonable number". - ABC

Australians with cash damaged in the bushfires are being urged to take the remains to their local bank branch or bushfire evacuation centres to make claims for compensation.

The bushfires have destroyed thousands of homes across the country and the Reserve Bank is bracing itself for the highest ever number of claims following a disaster.

RBA assistant governor (business services) Lindsay Boulton told ABC News the damage from the recent bushfires was so severe that it could "quite possibly" result in a record-number of claims for compensation.

"Given the scale and the magnitude of the bushfires that we've seen in recent weeks we are expecting to get a reasonable number of bank note claims," he said.

"The amount of property damage through the bushfires on this occasion has been higher than we saw in the [2009] Black Saturday bushfires. So it may well be because that that we see higher claims."

But he said with more Australians opting to use electronic transactions than in previous decades, meaning less people may have been holding cash in their homes, the figure could also be lower than expected.

"People don't use banknotes the way they did 10 years ago, so that may suggest it may be less," he said.

"We are really not sure how many claims we will get, but we are gearing ourselves up for a high number of claims."

Economists estimate the final cost of the current Australian bushfires , while some analysts say it could cost the economy up to $20 billion in lost output.

Claims could take months to process

Mr Boulton urged Australians with damaged bank notes to submit claims as soon as they could, as it could take months to process a claim.

"The most convenient and easiest way is to take whatever debris, whatever residue, they have from their damaged bank notes into a branch of a local bank," Mr Boulton said.

He said the cash should be placed into a zip-lock bag and marked "bushfires".

"The bank will ask them to fill out some paperwork, which is really around getting contact details from the claimant," he said.

"And the bank will then forward them to us and we will assess them. That process will take a little while, depending on how quickly the bank notes get to us and how damaged they actually are."

Mr Boulton said at this stage the bank had not yet received any claims, but it could take some weeks before claims start flowing through.

The timing for compensation payouts depended on how badly damaged the bank notes were.

"Our focus though is to make sure we can process those claims as quickly as we can," Mr Boulton said.

"If they [the bank notes] are severely damaged it does require a fairly extensive process to authenticate the bank notes and identify the denomination of how much is actually there."

The more bank notes being submitted, the longer the process would likely take, he said.

Australians would be paid the full face value of the bank note, unless it was damaged before the bushfire.

"It would only be the case that they get partial value of the note if it was a partial note before it was damaged," he said.

For half a bank note, the RBA would pay out half the value. For example, for a $20 note with half of the note missing, the RBA would only pay $10.

"Providing the notes were proper notes — full notes — then, depending on the assessment, we should pay back the full amount of the face value of that note," he said.

Cost of replacing bank notes was $4.2m last year

The cost of replacing bank notes following previous disasters have been mixed.

Following the 2009 Black Saturday bushfires, the RBA received only 15 claims for damaged bank notes.

But for Cyclone Debbie in 2017, which resulted in severe damage from flooding, the bank paid out $3.3 million for just over 30 claims.

Mr Boulton said that constituted about half the total value of bank notes the RBA paid out that year.

"In the past financial year, we paid out 15,000 claims, which totalled about $4.2 million," Mr Boulton said.

"The average amount paid out for the year was under $300. But the median was about $30."

Mr Boulton said if it was obvious to the Reserve Bank from its assessment that bank notes were deliberately damaged, it had the option of declining the claim.

It is a criminal offence to deliberately damage bank notes.



© ABC 2020

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